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Five years on: HP Compaq merger declared a success

IDC believes the deal has achieved its main objectives

Five years after the mega-merger that saw Compaq climb into bed with
HP,
IDC has declared
the deal a success.

The analyst firm said at the time of the merger, which was first mooted in
September 2001, that the two companies would be "better off together".

IDC has now claimed that the firms have successfully completed a "massive
integration effort" and moved the combined company forward to new revenue and
profit levels.

"What makes the merger interesting from a technology perspective is the
extent to which HP has improved its position in a number of core markets that
were rapidly commoditising," said Crawford Del Prete, senior vice president of
communications, hardware, services and software research at IDC.

"The merger came at a time when both companies were becoming irrelevant in a
number of key product categories.

"By completing the deal when it did, HP managed to position itself for the
next wave of enterprise computing by leaping ahead of the trends that were
working against the two companies as independent entities."

According to IDC, an important linchpin to the merger's success was the
commitment to infrastructure software, which helped move the combined company
away from commodity hardware and into the management layer.

OpenView gave HP a foundation from which to build in the software business,
putting the company in a stronger position to compete with the largest system
and services providers worldwide, the analyst firm noted.

However, it was not just technological change that facilitated the merger.
IDC maintained that the commitment to cultural change was equally important,
where it was hoped that the infusion of Compaq's fast-paced corporate culture
would help increase HP's "business velocity".

But IDC warned that organisational changes have remained a "critical issue"
as HP had reduced the size of its workforce, seen the departure of two chief
executives, and reorganised its management structure.

"The merger accomplished what HP and Compaq set out to do in the first place,
providing the critical mass and reach needed to ensure a long-term role in an
industry undergoing a fundamental transition," said Jean S. Bozman, research
vice president in IDC's Worldwide Server group and co-author of the report.

"This deal enabled the merged company to grow revenue and profits in an
increasingly competitive marketplace."